In this piece, I will post something regarding the above. I am referring to the regular retail traders who do trades in their own places/home offices, in the Starbucks cafe, (and not the institutions).
Comparing the two traders above, the following are my observations:
Well Funded Traders:
They have funds enough within their capacity to deal with the margin and have confidence on how much they can allocate with the number of contracts/shares they can trade.
You don't feel much about the volatility movement because you can put a wide stop, thus minimizing your number of stops that are getting hit or getting triggered.
Have much leeway on how much you can allow from your buy price to your stop price - and this is a great help on the part of the traders since this is about confidence and the emotional impact it develops while in the trade.
Underfunded Traders:
For the underfunded traders, there lots of disadvantages.
First, you cannot trade that much because of limited funds and are afraid of the loses especially when volatility is at high range.
You are prone to putting tight stops, thus you are always subject to getting hit often - one cause that depletes your (minimal) account (and more commission costs).
Your emotional part is prone to your trading concentration because of uneasiness - you have no confidence to trade even though your parameters or edge are on your side.
These are just few observations, but there are advantages and disadvantages on both sides too (vice versa). That all depends on how you treat trading.
There are some underfunded traders who are discipline and have plans. They use their time in learning while building their capital.
It would be better that way to trade first on a few amount that you can afford to lose while learning.
Build first your knowledge on how the market works, and when you are ready to trade, you have already the idea in trading.
But the important thing is you should be in the market - develop your skills.
Actual trading is more important than theory.
You can read all the expensive books ever written by great authors/traders but if you don't practice trading - you will end up losing your capital, time, and your mind too (if your are not paying attention).
Developing traders should be in the market action, and you must sleep and breath the market all the time!
